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General Motors Raises Guidance, Sets Convertible Bond Sale

The auto maker cites stronger-than-expected industrywide demand.
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General Motors

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raised its earnings guidance for the first quarter and full year and outlined plans to shore up its balance sheet.

The automaker expects to earn $1.20 a share in the current quarter and $3.50 a share for all of 2002, excluding the impact of Hughes Electronics and various other items. The average first-quarter earnings estimate for GM was 87 cents a share, while the year consensus was $2.95 a share, according to Thomson Financial/First Call. GM cited stronger-than-expected demand industrywide and in particular for its cars and trucks as reason for the raised forecast.

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GM also raised its first-quarter North American production estimate by 20,000 vehicles to 1.34 million and said raised its full-year estimate by 100,000 vehicles to 5.1 million. Industrywide, GM expects total North American vehicle sales of 16 million units.

The company also said it filed with the

Securities and Exchange Commission

to sell $2.5 billion of 30-year convertible bonds. Combined with other cash-generation initiatives, proceeds will be used "to rebuild GM's liquidity position, reduce its underfunded pension liability and fund its post-retirement health care obligations," it said in a statement. Pricing is expected this week.

"GM is taking steps to strengthen its balance sheet by $10 billion in 2002 through a combination of improved cash flow, dividends from GMAC stemming from its anticipated earnings strength, proceeds from the proposed split-off and merger of Hughes and public offerings," GM said.